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May 13, 2013

REIT Returns Are on a Roll, but Some ETFs Lag

The performance of equity real estate investment trusts (REITs) is outpacing that of the hot stock market, according to industry data released early Monday. A survey of some major ETFs with a REIT focus, though, shows that some these financial products aren’t keeping pace with the markets as consistently as their industry indexes—at least in the first few months of the year.

On a total return basis, the FTSE NAREIT All REITs Index gained 5.8% in April, while the FTSE NAREIT All Equity REITs Index ticked up 6.33%, according to the National Trade Association of Real Estate Investment Trusts (NAREIT).

During the same 30-day period, the S&P 500 rose 1.93% and the Dow Jones 1.94%.

In the first four months of April, the FTSE NAREIT All REITs Index improved 15.44%, and the FTSE NAREIT All Equity REITs Index increased 14.94%. The S&P 500 was up 12.74% in the same period.

For the 12 months ending April 30, the FTSE NAREIT All REITs Index rose 22.20%, and the FTSE NAREIT All Equity REITs Index 21.28%. The S&P 500’s gain was 16.89% for the year-long period.

A look at 12-month data as of May 13, however, shows that some key real estate ETFs are not always matching the NAREIT returns.

As of Monday, the S&P is up about 22% for 12 months, and the Dow roughly 19%. The iShares Cohen & Steers Realty Majors ETF (ICF), however, has ticked up only 15% in the same 12 months. The Vanguard REIT ETF (VNQ) is doing better at 17.5%, but is still behind the major market indexes.

On a year-to-date basis through May 13, however, the Vanguard REIT is up about 15.5% vs. 15% for the Dow Jones and 14.5% for the S&P. Plus, the iShares Cohen & Steers Realty ETF is up about 15%, beating the performance of the broader market indexes in early 2013.

The performance of both the SPDR DJ Wilshire Global Real Estate ETF (RWO) is about the same as the Dow at 13% year to date as of Monday. And the SPDR DJ Wilshire International Real Estate ETF (RWX) is up about 11% this year.

But RWO has a very strong 12-month performance that is slightly better than that of the S&P at 22%.

In terms of specific REIT sectors, year to date through April, the health care sector tops the list of performers with a 23.77% total return.

The fund that tracks this group is Health Care REIT (HCN)—which is not an ETF. It’s boasting returns of 22.5% from Jan. 1 to May 10, and 35% for the past 12 months, putting it way ahead of the major market indexes.